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According to a report from CNBC, buyout experts Kohlberg Kravis Roberts & Co are in discussions about a possible investment in CAA (Creative Artists Agency), one of the top Hollywood talent agencies. The talks are still in the early stages and could easily fall apart.

But if a deal gets done, it could amount to a roughly $200 million stake for KKR and would represent a minority interest. And it will be another sign of ongoing, major changes in Hollywood.

The Rise of CAA

Back in 1975, a group of top agents from the William Morris Agency opened the CAA doors. It was a scrappy start-up but the founders had lots of contacts and ambition -- particularly the divisive agent Michael Ovitz. Ultimately, he would transform the entertainment business.

Ovitz was the mastermind behind "packaging," in which all the actors, the directors and writers for a TV show or movie would be repped by one agency. It was a powerful way to negotiate better terms and, of course, commissions. Ovitz was also smart in getting equity participation in projects.

With packaging, Ovitz was also able to assemble an elite client list. A few of the boldfaced names among them: Madonna, Tom Cruise, Barbra Streisand and Steven Spielberg.

And Ovitz did not stop innovating with packaging. By the late 1980s, Ovitz expanded CAA's business and helped to broker a variety of mega Hollywood mergers. These included the Sony-Columbia Pictures deal, as well as the $7.5 billion Matsushita-MCA transaction.

By 1995, however, Ovitz had moved on to the Walt Disney Company (DIS) and a new management team took over at CAA. While there were problems -- including client defections -- the firm was able to continue its growth and remain a big player in Hollywood.

A Good Deal?

Currently, CAA has about 1,000 employees and brokers more than $700 million in contracts. The firm has invested heavily in new media, such as the Will Ferrell-backed Funnyordie.com, and has built a strong sports business.

But CAA faces many challenges. The agency business is under plenty of pressure because of lower compensation levels in Hollywood and falling DVD sales. Also, returns from new investments will take time to gain traction. In other words, a KKR investment would certainly be helpful. While it is true that investing in talent agencies can be risky, CAA has shown its staying power and ability to innovate. Thus, so long as the parties can agree on a valuation -- no small matter -- a deal would likely make for a smart partnership.